July 20 (Bloomberg) -- Sugar fell in New York on speculation that India, the second-largest producer, may offer to sell unrefined supplies of the sweetener, adding to a global surplus.

Investors and traders expect India to issue a tender on July 23 for up to 265,000 metric tons of raw sugar, according to a report yesterday by BNP Paribas Commodity Futures Inc. in New York. Until recently, India only exported white, refined sugar. A record crop in India may lead the country to double total exports, a minister said last week.

``There is going to be a tender from India,'' said Ken Holtzman, president of New World Futures in New York. ``After a strong rally, longs are taking profit.''

Sugar futures for October delivery fell 0.02 cent, or 0.2 percent, to 10.30 cents a pound at 12:43 p.m. on the New York Board of Trade. Futures are down 33 percent in the past year on rising global production.

Indian sugar output may rise 7 percent to a record 30 million tons in the year ending Sept. 30, 2008, from an estimated 28 million tons this year, according to the National Federation of Cooperative Sugar Factories Ltd., a producer group. India may double exports to 3 million tons in 2008, Akilesh Prasad Singh, the minister for agriculture, consumer affairs, food and public distribution, said on July 9.

Earlier, the price of sugar rose to 10.53 cents, the highest for a most-active contract since March 13, on speculation rising energy prices will boost demand for ethanol, an alternative fuel made from cane in Brazil.

Crude Rises

Crude oil rose to an 11-month high of $76.13 a barrel in New York today.

Sugar output from mills in Brazil's center-south, where 85 percent of the country's cane is grown, fell 8.7 percent while production of ethanol rose 11 percent in the first half of 2007 from a year ago, the Center South Sugar and Ethanol Industry Association said July 12. Brazil is the biggest producer of sugar and ethanol made from cane.

The sugar market is ``seeing sugar production in Brazil so far 10 percent less than last year when it should have been equal or greater than due to higher sugar cane production,'' Michael McDougall, senior vice president for Fimat USA LLC in New York, wrote in a report today.

``If the sluggish production continues and a wild card or two is thrown in, Russia deciding to increase their tariff, then we should see a test higher,'' he said.

The price in that case may move between 10.50 cents and 11.50 cents, he said.

To contact the reporter on this story: Shruti Daté Singh in Chicago at ssingh28@bloomberg.net

Last Updated: July 20, 2007 13:07 EDT